Box shipping still hit by overcapacity

HAMBURG/SINGAPORE:Hapag Lloyd has increased its Q1 2014 net loss by €25.5 million to -€119.1 million on revenue of €1.55 billion – down €98 million from the same period last year.

Despite a 5.5 percent increase in TEU traffic to 1.4 million for the quarter, freight rates fell 8.0 percent to US$1,422 per TEU compared to US$1,546 a year earlier.

The company says its goal is this year is to improve its net margin: "Our success in achieving this target will depend largely on the development of freight rates in the second half of the year and, above all, on the peak season," said Michael Behrendt, outgoing CEO and newly-appointed group chairman. "With the expansion of the G6 Alliance to include all east–west trades, which is currently being implemented in our service network, together with the takeover and integration of CSAV's container segment, which still has to be approved by the competition authorities, Hapag- Lloyd will again significantly improve its ability to compete. This means that we are well positioned for the future and for additional growth."

Hapag Lloyd estimates world container capacity was 18.3 million TEU at the beginning of 2014 and expects an additional 1.2 million units this year and a further 1.1 million TEUs in 2015.

Also reporting a loss for the first quarter was APL, the container shipping business of the NOL Group. With revenue down five percent to US1.87 billion, APL reduced its net loss to -US$83 million over the same period last year.

"Operating conditions in the first quarter had been difficult, with severe weather disruptions in Europe and North America. This compounded the challenges posed by continued excess capacity in the container shipping business," said NOL Group president & CEO Ng Yat Chung. "Nonetheless, both our business units delivered better year-on-year operating results this quarter. Going forward, global economic prospects and trading conditions remain uncertain. Oversupply of shipping capacity will continue to exert pressure on liner freight rates. The group aims to improve its financial performance in 2014, through its continued focus on cost discipline and drive for operational efficiency. We will also seek growth opportunities, particularly in our logistics business."

The NOL Group, which also includes a logistics business that reported a one percent drop in revenue to US$423 million for the quarter, posted an overall net loss of US$98 million for the period.